But even the strongest cities can't -- and shouldn't have to -- handle the costs of urban poverty by themselves/ In the 1960s and 1970s, rich and middle-class city dwellers fled to the suburbs in part to escape having to pay the costs of addressing urban inequality. Rich enclaves have often formed right outside of urban political boundaries, where the prosperous can be close to the city without having to pay its taxes or attend its schools. A level playing field mans that people should be choosing where to live based on their desires for neighborhood or opportunity, not based on where they can avoid paying for the poor.
-- Edward Glaeser, Triumph of the City, page 258.
The difference between Seattle and New Haven is that the core of Seattle had managed to capture at least part of the prosperity that comes from institutions like the University of Washington and Microsoft. This suggests to me that there is at least a two stage process to using a university to enhance urban prosperity.
It also suggests we might want to be leery about things like significant budget cuts as it would be foolish to risk disrupting these types of success stories.